United States v. Howe

On Appeal from the United States District Court for the District of Delaware (D.C. No. 04-cr-00085) District Judge: Honorable Gregory M. Sleet.

The opinion of the court was delivered by: Fisher, Circuit Judge.

PRECEDENTIAL

Argued June 3, 2008

Before: FISHER and JORDAN, Circuit Judges, and YOHN,*fn1 District Judge.

OPINION OF THE COURT

In this appeal we review the sentence imposed on a defendant who was convicted of two counts of wire fraud. The sentence consisted of two years' probation (including three months' home confinement), despite an advisory Sentencing Guidelines range of 18 to 24 months' imprisonment. The District Court imposed no fine and no forfeiture (other than the special assessment of $200). The Government appeals from the District Court's judgment of sentence. We will affirm.

I.

A. The Offense

After retiring from the United States Air Force, where he served as a contracting officer, Malcolm G. Howe founded and operated Elite International Traders, Inc. (Elite). Elite was in the business of supplying goods to the United States Armed Forces under written contract. Typically, Elite acted as a "middle man," purchasing the contracted goods from a manufacturer and delivering them to the military customer. Elite would then invoice the Defense Finance and Accounting Service (DFAS) for payment.

On September 27, 2000, Elite contracted with the Air Force to supply twenty embeddable computer encryption modules for $152,850. These devices are used to encrypt national security information transmitted among networked military computers. The devices in this case were destined for the United States Air Force Base at Ali Al Salem in Kuwait. Under the terms of the contract, Howe was to obtain the devices and deliver them to Dover Air Force Base in Delaware for military transport to Ali Al Salem Air Force Base.

To obtain payment on the contract, Elite was required to submit to DFAS proof of delivery to Dover Air Force Base. In fact, Howe (on behalf of Elite) never purchased or delivered the devices, but he still submitted or caused to be submitted to DFAS an altered straight bill of lading*fn2 on January 22, 2001, falsely indicating that the devices had been delivered. Four days later, in reliance on the altered straight bill of lading, DFAS paid Elite $152,850.

When Ali Al Salem Air Force Base discovered that the devices had not arrived, the Air Force initiated an investigation to locate them. Howe then engaged in a sustained effort to obstruct the investigation in order to hide his crime. For example, in July 2002, Howe generated false invoices to create the impression that Elite had reimbursed a foreign company named Abdullah Trading for the purchase of the encryption modules. (Abdullah Trading ultimately paid $152,850 in restitution to the Department of Defense on Howe's behalf.) Howe backdated the invoices to January 10, 2001, conforming them to the date he falsely claimed to have delivered the contracted devices. The Air Force never found them and referred the case for law enforcement investigation. During the subsequent investigation, Howe continued to make several untruthful statements regarding the purported transaction.

On January 8, 2003, Howe's home and business were searched pursuant to a search warrant, and Howe consented to an interview with the investigating agents. Howe made further inconsistent and questionable statements during the interview. For example, Howe stated, for the first time in the two-year investigation, that the handwriting on the January 2001 altered bill of lading belonged to the owner of Abdullah Trading rather than himself.

B. The Trial

On August 24, 2004, the Government filed an indictment against Howe containing two counts of wire fraud, in violation of 18 U.S.C. §§ 2 and 1343. Count I targeted the Elite invoice in the amount of $152,850 and the altered straight bill of lading, while Count II targeted an electronic funds transfer of $152,850 from a Massachusetts bank to a Delaware bank. Trial commenced on September 11, 2006. At trial, Howe stated again that he believed that the contract was being handled by Abdullah Trading. The jury found Howe guilty on both counts on September 14, 2006.

C. The Sentence

Counts I and II were grouped together for Guidelines calculations purposes under Guidelines § 3D1.2(d).*fn3 The base offense level was 6 under § 2F1.1(a). The amount of loss of $152,850 resulted in 7 levels added under § 2F1.1(b)(1)(H). Two more levels were added to reflect more than minimal planning under § 2F1.1(b)(2)(A), resulting in an adjusted offense level of 15. There were no Chapter Four enhancements, nor were there downward adjustments for acceptance of responsibility under Chapter Three of the Guidelines. At the December 12, 2006 sentencing hearing, the District Court therefore assigned Howe a Guidelines total offense level of 15 and a Criminal History Category of I. The corresponding advisory Guidelines range was 18 to 24 months' incarceration, along with a $4,000 to $40,000 fine under § 5E1.2(c)(3).

The Government recommended a sentence of 18 months, arguing that "Mr. Howe utilized his knowledge of the contracting process, utilized his knowledge of the fast pay system in particular, in order to take advantage of that system. He found a weakness and he exploited it. After doing that, he lied about it for years." The District Court, however, decided to vary downward from the bottom of the Guidelines to sentence Howe to two years' probation with three months' home confinement, to be served concurrently at each count. It also declined to impose any fine. The District Court provided the following justification for this sentence:

"Mr. Howe, after having considered the provisions of the United States Sentencing Guidelines, the advisory Guideline range, the Supreme Court's ruling in United States versus Booker, the sentencing factors outlined in Title 18, Section 3553(a), and the underlying goals of sentencing, most of which have been mentioned by you and your counsel and [the] AUSA . . . , including punishment, deterrence, rehabilitation, respect for the law, I am sentencing you to probation. This sentence reflects the Court's view that, under the totality of the circumstances involved, a sentence of probation rather than a period of incarceration better serves the interests of justice, as that term is applied to the societal interest in sentencing reflected in Section 3553(a) and various rulings of our Supreme Court and various courts of appeals.

The Court feels this sentence is appropriate for several reasons.

First, Mr. Howe, the Court recognizes that this is an isolated mistake, by all accounts, albeit an extraordinarily serious one. Mr. [AUSA] has not overreached at all in his description of the nature of the offense and the calculated nature of the offense, and the taking advantage of special knowledge that you possessed and to which you came to possess during the course of your service.

But by all accounts, you have led an honorable and lawful life until this point, as attested by the many, more than 40 character letters that I received and read.

You have no prior criminal history, nor any history of substance abuse of any kind, as best I can tell. You have served in the U.S. Military for 20 years and were honorably discharged with the rank of Master Sergeant.

Further, you are a well-regarded member of your community. This is further evidenced by the many letters, many, many letters from non-relatives, people whom you served, high-ranking officers and others, members of the ...

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